Philip Salter
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A SURPRISE shortfall in tax receipts and news that the Chinese downgraded UK sovereign debt took the shine off sterling in yesterday’s trade, but there’s little reason to be cheering the euro now, either. Eurozone debt concerns remain high and even the release of some marginally better than expected economic readings from Germany isn’t going to provide much support. IG Index is quoting euro-sterling at £0.8727-£0.8729.

Earlier this week, the euro fell sharply after ratings agencies shifted Italy and Belgium to a negative outlook. We may find the theme is towards safe haven currencies such as the Swiss franc. The euro is at a record low against its counterpart since 1999, and with the situation still fragile, traders should be cautious. Capital Spreads quotes euro-Swiss franc at SFr1.2412- SFr1.2416.

Sterling rallied against the dollar yesterday, bouncing off a seven week low of $1.6069 to hit highs of $1.6178. The move was down to traders covering speculative short positions after Moody’s threatened to cut its ratings on some UK banks. Spreadex offers sterling-dollar at $1.6157-$1.6160.

Since the Japanese earthquake the yen has stayed remarkably strong, however there appear to be early signs that we could see the beginning of a deterioration with respect to the yen. The dollar-yen pair has struggled to overcome ¥82.10, but if it does we could well see further gains. CMC Markets spread on dollar-yen is ¥82.062-¥82.08.

Our recommended sell of sterling-Swiss franc for the last two weeks has worked out well, but the repeated failure to break SFr1.420 on each of the last five days suggests someone is keen to keep it above this level. So look to close any shorts and go long around SFr1.420 and play a bounce towards SFr1.44, where the position should possibly be reversed again. Spread Co offers a spread of SFr1.4221-SFr1.4228.